Announcement

Collapse

Economics 301 Guidelines

This is the area where economic theories and trends are discussed.

Balance your checkbook before participating.

Forum Rules: Here
See more
See less

Bitcoin versus other monies.

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Bitcoin versus other monies.

    The author of this essay http://www.lewrockwell.com/2013/12/g...about-bitcoin/

    has "some serious reservations and concerns" about Bitcoin. He does think it's possible for digital systems like Bitcoin to have roles in the future monetary system, though.



    He thinks that Bitcoin boosters expect Bitcoin to have a role greater than gold or silver, and disagrees with that. I expect that Bitcoin will be complementary with the precious-metal monetary system because of Bitcoin's superiority in several ways.

    1)There is the problem of counterfeiting. Was there not recently in the news a report of gold-plate bullion? It should be much harder to fake bitcoins or some other digital money.

    2) One party can conduct a transaction with another party at the speed of light even if they are antipodal to each other. Precious-metal money would have to be transported by hand or machine when it is necessary to transport.

    3) Storage costs for metallic money would be greater. Also, insurance against losses might be seen as necessary.

    4) Losses of metallic money are much more likely. To be sure, bitcoin or other digital money wallets can be lost.

    5) Accounting and auditing costs would be much greater for metallic money.

    There may be other advantages to digital money, but I think I have done enough (That's a chance for you to show me up!)


    Partly for those reasons I envision that in time many people will use both metallic money and digital money because they are complementary, contrary to what the author says--he seems to think that we cannot use both metallic money and digital money (false dilemma).


    Now this: The author writes, "Perhaps it’s my conspiratorial side, but something smells fishy here. If Bitcoin is as dangerous to the State as its proponents in the liberty movement claim, why isn’t the State already moving to crush it?" In the first place, the digital money movement is still rather small. What all the now-existing digital money can purchase is a small part of the world economy. In the second place, perhaps the State welcomes for now the competition that the digital money movement offers to metallic money. Third, why should the State now act madly and precipitately? It can afford to bide its time and wait for a good time to strike. Indeed, later on in the essay the author does suggest just that.




    A "fundamental characteristic" of money: In an economy it is traded or held for trade later more often than any other market good--really? This webpage uses a slightly different definition http://libertarianstandard.com/2013/...an+Standard%29

    Many Turkish businesses will take many monies: dollars, euros, roubles, etc. In Argentina black market exchanges will exchange pesos for dollars or euros, or vice versa.


    Are bitcoins money? I concede the regression theorem does not apply http://www.garynorth.com/public/11844.cfm So, no, not money? I suspect the theorem should not be used, but I am yet unable to explain why not.
    The greater number of laws . . . , the more thieves . . . there will be. ---- Lao-Tzu

    [T]he truth I’m after and the truth never harmed anyone. What harms us is to persist in self-deceit and ignorance -— Marcus Aurelius, Meditations

  • #2
    I'm not real familiar with the bitcoin but it is my belief that many transactions today are delayed intentionally so as to hold your money for the gain of interest (time value of money) and thus causing transactions to last longer than they really should. Especially banking transactions.

    Comment


    • #3
      I'm familiar with the bitcoin. It was invented specifically for the buy and sell of illegal substances, parahpanelia and black market items. Its used primarily on the dark internet. Purchasers invest in hidden accounts using their currency, and then proceed to purchase in the bitcoin. After the subsequent arrest of the kid who ran the silk road (and the bitcoin's primary marketer) the internet currency crashed and became virtually worthless because 75 percent of its market was worthless. Because of why it was invented, it needs a second look as for the reason one would invest in it. Think about it. It was invented for the buy sell and trade of inherently illegal and evil items. My assesment is No.
      A happy family is but an earlier heaven.
      George Bernard Shaw

      Comment


      • #4
        So, it's pirate gold?
        If it weren't for the Resurrection of Jesus, we'd all be in DEEP TROUBLE!

        Comment


        • #5
          Originally posted by Catholicity View Post
          I'm familiar with the bitcoin. It was invented specifically for the buy and sell of illegal substances, parahpanelia and black market items. Its used primarily on the dark internet. Purchasers invest in hidden accounts using their currency, and then proceed to purchase in the bitcoin. After the subsequent arrest of the kid who ran the silk road (and the bitcoin's primary marketer) the internet currency crashed and became virtually worthless because 75 percent of its market was worthless. Because of why it was invented, it needs a second look as for the reason one would invest in it. Think about it. It was invented for the buy sell and trade of inherently illegal and evil items. My assesment is No.
          Sorry, but you are wrong. It's often used for legit purposes. Your argument is not much better than arguing the dollar is evil because it's used to purchase drugs, anyway. When the government shut down the Silk Road, the Bitcoin-dollar exchange rate did fall all the way from around $1230 per bitcoin on December 4 to around $500/bitcoin on December 18. But the rate quickly bounced up to test its high. Now it's around $920 to 1 bitcoin. If you want a historical chart in a webpage rated safe by Norton try this http (scroll down)://www.xe.com/currencycharts/?from=XBT&to=USD&view=1Y Caveat: the rate varies from source to source, because there are many places to exchange dollars for bitcoins or vice versa.
          The greater number of laws . . . , the more thieves . . . there will be. ---- Lao-Tzu

          [T]he truth I’m after and the truth never harmed anyone. What harms us is to persist in self-deceit and ignorance -— Marcus Aurelius, Meditations

          Comment


          • #6
            wow are you off. A bitcoin was worth in USD as of December 2013 50 us dollars. On some stock exchanges its a little higher. And yes the argument holds. While its not Illegal in the US, it is in China and in other countries to use it due to its high rate of purchase for Child Pornography. According to the FBI it has a high rate of association with illegal purchase, theft of money, and instability. Its not desirable at all
            A happy family is but an earlier heaven.
            George Bernard Shaw

            Comment


            • #7
              Originally posted by Catholicity View Post
              wow are you off. A bitcoin was worth in USD as of December 2013 50 us dollars. On some stock exchanges its a little higher. And yes the argument holds. While its not Illegal in the US, it is in China and in other countries to use it due to its high rate of purchase for Child Pornography. According to the FBI it has a high rate of association with illegal purchase, theft of money, and instability. Its not desirable at all
              Bitcoin itself is not a bad concept. However, the problem lies with it being completely anonymous. Due to its allowance of anonymity, it had a higher rate of usage in the criminal underworld then in actual day to day life. I'm also pretty sure that Bitcoin had a higher exchange rate then $50 in December.
              "It's evolution; every time you invent something fool-proof, the world invents a better fool."
              -Unknown

              "Preach the gospel, and if necessary use words." - Most likely St.Francis


              I find that evolution is the best proof of God.
              ---------------------------------------------------------------------------------------------------------------
              I support the :
              sigpic

              Comment


              • #8
                Originally posted by Catholicity View Post
                wow are you off. A bitcoin was worth in USD as of December 2013 50 us dollars. On some stock exchanges its a little higher. And yes the argument holds. While its not Illegal in the US, it is in China and in other countries to use it due to its high rate of purchase for Child Pornography. According to the FBI it has a high rate of association with illegal purchase, theft of money, and instability. Its not desirable at all
                Cath,

                The Bitcoin conversion rate in December was significantly higher than $50 USD. You might be thinking of what I believe are called "microbits," or bitcoins split among many different investors. Here's an exchange chart for Bitcoin from November 2012:



                Bitcoin bottomed out in late December at ~$600 USD and is now right around $900 USD (per Bitcoin).

                As far as the illegal usage of the digital currency, I think it's got a long way to go before it beats plain old cash. And the US government doesn't seem to believe Bitcoin poses a greater-than-average threat in that regard: eventually, people have to cash in and out their Bitcoins, a process which is traceable. So while people can and do use the currency for nefarious purposes, it's not that much different than cash. The primary benefit of Bitcoin is that both the buyer and seller avoid overhead fees that are often attached to credit cards and the like.

                That said, I don't think Bitcoin's a great currency. We know where the ceiling is — there can only be 23 million Bitcoins produced, I believe — and we know that the currency is prone to wildly fluctuating swings. What's less often mentioned is that there isn't really a floor for Bitcoin. Gold-standard currency obviously has its floor in the value of gold (or another precious metal). Fiat currency has the floor in the resources and assets of the institution backing it (in our case, the United States of America). Bitcoin is a bubble-prone currency with no resources that provide natural value — the currency's value is driven entirely by the supply and demand of the people using it. And that's largely why Bitcoins have become so pricey; their value is being inflated by speculators trying to buy low and either sell high or hold for higher. It's a dangerous game to play with money, especially when it comes time to sell your Bitcoins to someone else so you can cash out.

                —Sam
                "I wonder about the trees. / Why do we wish to bear / Forever the noise of these / More than another noise / So close to our dwelling place?" — Robert Frost, "The Sound of Trees"

                Comment


                • #9
                  It's always theoretically possible for people to disdain any given thing. Hence, the theoretical floor for any given thing is zero. I don't think that saying that the floor for Bitcoin is zero, is saying anything worth paying much attention to. I do realize that I should warn putting your dollars in Bitcoins is quite risky. Risk only what you can afford to lose.
                  The greater number of laws . . . , the more thieves . . . there will be. ---- Lao-Tzu

                  [T]he truth I’m after and the truth never harmed anyone. What harms us is to persist in self-deceit and ignorance -— Marcus Aurelius, Meditations

                  Comment


                  • #10
                    The NBA's Sacramento Kings announced that they will be the first professional sports team to accept Bitcoin at their arena, and reports are that other teams (none named publicly) have also been considering doing the same thing. I see this as a harbinger for more legitimate uses short term, though I am not particularly optimistic on its staying power.

                    http://money.cnn.com/2014/01/16/news...s/nba-bitcoin/
                    "I am not angered that the Moral Majority boys campaign against abortion. I am angry when the same men who say, "Save OUR children" bellow "Build more and bigger bombers." That's right! Blast the children in other nations into eternity, or limbless misery as they lay crippled from "OUR" bombers! This does not jell." - Leonard Ravenhill

                    Comment


                    • #11
                      Originally posted by Truthseeker View Post
                      It's always theoretically possible for people to disdain any given thing. Hence, the theoretical floor for any given thing is zero. I don't think that saying that the floor for Bitcoin is zero, is saying anything worth paying much attention to. I do realize that I should warn putting your dollars in Bitcoins is quite risky. Risk only what you can afford to lose.
                      The theoretical floor for gold isn't zero — even if no one wants it, you still have this shiny metal you can use for decoration or electrical work. Likewise for a "basket of commodities." And while fiat currency is somewhat less tangible, it's still backed by very tangible resources and assets — and thus pretty hard to manipulate significantly through speculation.

                      Bitcoin, in contrast, isn't backed by resources or even standing governments. It's market value is driven purely by the willingness of a small group of people to treat Bitcoins as valuable. It has, in other words, no floor. And that is the primary element in assessing Bitcoin's risk factor. You can't say Bitcoin is risky without acknowledging the wild and unpredictable swings in its value. And you can't understand those swings without acknowledging the lack of anything tangible backing the real value of Bitcoin. Unless the group of people willing to treat Bitcoins as inherently valuable is very, very large, its lack of tangible value works as a severe disadvantage.

                      I'm not opposed to digital currencies, by any means. Just noting that Bitcoin has some specific flaws that should keep most people from putting money into that market right now.

                      —Sam
                      "I wonder about the trees. / Why do we wish to bear / Forever the noise of these / More than another noise / So close to our dwelling place?" — Robert Frost, "The Sound of Trees"

                      Comment


                      • #12
                        Originally posted by Sam View Post
                        The theoretical floor for gold isn't zero — even if no one wants it, you still have this shiny metal you can use for decoration or electrical work. Likewise for a "basket of commodities."
                        The value of any given thing, like its beauty, is in the eye of the user or beholder. IOW, value is never more than subjective. I may value an apple more than you do in certain circumstances, while you value an orange more than I do.

                        Bitcoin, in contrast, isn't backed by resources or even standing governments. It's market value is driven purely by the willingness of a small group of people to treat Bitcoins as valuable.
                        But don't forget the expanding network of computers that the Bitcoin community has forged. That is a more-or-less tangible resource.
                        It has, in other words, no floor.
                        Once again, true but essentially immaterial.
                        And that is the primary element in assessing Bitcoin's risk factor.
                        No. I'm not sure I can explain why its exchange rates are so volatile, but that's not the reason--it can't be.
                        You can't say Bitcoin is risky without acknowledging the wild and unpredictable swings in its value.
                        But you can say the same about speculating in the financial markets.
                        And you can't understand those swings
                        Who could explain why the Dow is up and the Nasdaq is down on a given day?

                        OK, so you think Bitcoin will turn out to be just a fad. OK.

                        Just noting that Bitcoin has some specific flaws that should keep most people from putting money into that market right now.
                        Pray tell what those flaws are.
                        The greater number of laws . . . , the more thieves . . . there will be. ---- Lao-Tzu

                        [T]he truth I’m after and the truth never harmed anyone. What harms us is to persist in self-deceit and ignorance -— Marcus Aurelius, Meditations

                        Comment


                        • #13
                          Originally posted by Truthseeker View Post
                          The value of any given thing, like its beauty, is in the eye of the user or beholder. IOW, value is never more than subjective. I may value an apple more than you do in certain circumstances, while you value an orange more than I do.
                          No, that's not true. The value of a hammer is primarily to drive nails into hard surfaces. This is true regardless of the beholder's valuation. Hammers have a functional purpose in the world. Gold, likewise, has functional purpose — its decorative purpose might be pretty relative to a given person — though most everyone likes the look, if not the feel, of gold — but it's a very valuable component in electronics. In this sense, gold is very unlike beauty; its scarcity combined with its utility makes up a certain economic floor — at the very least, gold will not be less valuable than the demand for its use in the electronics sector.

                          Originally posted by Truthseeker View Post
                          But don't forget the expanding network of computers that the Bitcoin community has forged. That is a more-or-less tangible resource.
                          It's not a resource for Bitcoin, at least not one inherent to Bitcoin. Nearly all of those computers have been repurposed to mine Bitcoins and they can, with little or no change, be used for other purposes.

                          Originally posted by Truthseeker View Post
                          Once again, true but essentially immaterial.
                          No, it's quite material. Understanding that Bitcoin lacks any inherent value and is backed by no indirect resources other than a consensus of opinion among a small set of investors is crucial to understanding the risks involved with the currency. Again, you can't agree that investment in Bitcoin is risky without understanding this fact. Otherwise, what makes it a risky investment? It's not like a company's stock, which is linked to how well the company performs. Bitcoins can't underperform or overperform.

                          Originally posted by Truthseeker View Post
                          No. I'm not sure I can explain why its exchange rates are so volatile, but that's not the reason--it can't be.
                          It certainly can be and, apart from more compelling explanations, I'm inclined to believe it is the primary explanation. Gold's turbulent market swings can be similarly explained: when fear rules the market, gold develops a bubble. When the market stabilizes, the bubble bursts. Gold prices correct to more closely match its actual utility.

                          Originally posted by Truthseeker View Post
                          But you can say the same about speculating in the financial markets. Who could explain why the Dow is up and the Nasdaq is down on a given day?
                          Well, a good many people make very good livings explaining why the Dow goes up or Nasdaq goes down on a given day. Indeed, just listening to "Marketplace" on NPR will give the layperson a quick rundown of market forces driving the exchanges.

                          But, yes — speculating on the financial markets (especially the futures market) and speculating on Bitcoin are loosely similar. And I would advise the majority of people to stay away from investing in both unless they have specific interests in those areas.

                          Originally posted by Truthseeker View Post
                          OK, so you think Bitcoin will turn out to be just a fad. OK.

                          Pray tell what those flaws are.
                          I didn't call Bitcoin a fad.

                          I've gone to some length already describing the flaws. I see no need to repeat them.

                          —Sam
                          "I wonder about the trees. / Why do we wish to bear / Forever the noise of these / More than another noise / So close to our dwelling place?" — Robert Frost, "The Sound of Trees"

                          Comment


                          • #14
                            Originally posted by Sam View Post
                            No, that's not true. The value of a hammer is primarily to drive nails into hard surfaces. This is true regardless of the beholder's valuation. Hammers have a functional purpose in the world. Gold, likewise, has functional purpose — its decorative purpose might be pretty relative to a given person — though most everyone likes the look, if not the feel, of gold — but it's a very valuable component in electronics. In this sense, gold is very unlike beauty; its scarcity combined with its utility makes up a certain economic floor — at the very least, gold will not be less valuable than the demand for its use in the electronics sector.
                            But for a hammer to have value to someone, in his mind there must be an idea of what the hammer can be used for, to begin with. Even so, the hammer may have no value to him, unless he wants what can be built with the hammer.

                            I'm quite sure many people don't own anything like hammers. It's not unreasonable to say that all the hammers in the world are worth nothing to those people. At least they would not pay anything for even a low-price hammer, unless they have the idea of selling it for a marked-up price later.

                            Let's imagine a child playing with his toys and none of these can be used for hammering purposes. I can say that the child values his toys, and does not value any hammer even if his dad happens to own one and leaves it on the floor near the toys.
                            It's not a resource for Bitcoin, at least not one inherent to Bitcoin. Nearly all of those computers have been repurposed to mine Bitcoins and they can, with little or no change, be used for other purposes.
                            No, those are not components of the Bitcoin network of computers, at least in that when the day of the 21 million bitcoins arrive, the mining devices become useless for mining purposes and the network can continue to function as now.
                            No, it's quite material. Understanding that Bitcoin lacks any inherent value and is backed by no indirect resources other than a consensus of opinion among a small set of investors is crucial to understanding the risks involved with the currency. Again, you can't agree that investment in Bitcoin is risky without understanding this fact. Otherwise, what makes it a risky investment? It's not like a company's stock, which is linked to how well the company performs. Bitcoins can't underperform or overperform.
                            I will not argue any more the point that any investment theoretically has no floor--you can lose all your investment or speculation funds. And again yes Bitcoin is rather risky.
                            It certainly can be and, apart from more compelling explanations, I'm inclined to believe it is the primary explanation.
                            Let's quit this point here, I do not want to argue that any more.
                            Gold's turbulent market swings can be similarly explained: when fear rules the market, gold develops a bubble.
                            No, a bubble starts when people get greedy. To be sure, there is the fear that the train is leaving the station without you. Hmmm maybe that's what you meant? I don't think so.
                            When the market stabilizes, the bubble bursts.
                            No, it's the beginning of when people are made to see they have gotten greedy.
                            Well, a good many people make very good livings explaining why the Dow goes up or Nasdaq goes down on a given day. Indeed, just listening to "Marketplace" on NPR will give the layperson a quick rundown of market forces driving the exchanges.
                            All too true. Let me warn you, you're wasting time listening to such trivia.

                            But, yes — speculating on the financial markets (especially the futures market) and speculating on Bitcoin are loosely similar. And I would advise the majority of people to stay away from investing in both unless they have specific interests in those areas.
                            I don't understand, they would not speculate in them unless they WERE interested? I would advise that the more experience in speculation coupled with reading the best art-of-speculation books, the better.
                            The greater number of laws . . . , the more thieves . . . there will be. ---- Lao-Tzu

                            [T]he truth I’m after and the truth never harmed anyone. What harms us is to persist in self-deceit and ignorance -— Marcus Aurelius, Meditations

                            Comment


                            • #15
                              I have mixed feelings about bitcoin. First, it is now showing signs of a serious bubble. You can deny it all you want but there is a huge bitcoin frenzy going on right now. Have you seen the prices of the HD 7950? I bought one for $160 after $20 rebate in August of last year. Now they're over $450.00. The bitcoin mining market has exploded and many individuals have invested in ridiculously huge operations to get in on the cash flow. I'd be more inclined to take part of the prices weren't so high and wildly erratic. Many developers are in a race to create the best number crunching machine used solely for the purpose of hashing. I think it's a false gold rush.

                              Next, precious metals will always have high barter value. However, we and every other developed country in the world runs on fiat currency. Our fake dollars are supported entirely on faith in the American economy. The whole point of bitcoin is to stick it to the man and operate contrary to our centralized currency which the Fed dictates without law and without congressional oversight. It's decentralized and governed by pure capitalism. Zero regulation, all market currency as opposed to the Fed's complete regulation, manipulative market currency.

                              I like the idea of bitcoin because I don't like the Fed. But I think that might be the only reason, really.

                              Comment

                              Related Threads

                              Collapse

                              Topics Statistics Last Post
                              Started by Catholicity, 01-17-2014, 11:50 AM
                              605 responses
                              96,736 views
                              0 likes
                              Last Post rogue06
                              by rogue06
                               
                              Working...
                              X